WASHINGTON (AP) — Builders broke ground last month on the fewest homes in nearly two years, a reflection of declines in home prices and diminished demand that has made it difficult for them to compete.
The Commerce Department says home construction plunged to a seasonally adjusted 479,000 homes last month, down 22.5 percent from the previous month. It was the lowest level since April 2009 and the second-lowest on records dating back more than a half-century.
The building pace is far below the 1.2 million units a year that economists consider healthy.
Millions of foreclosures have forced home prices down and more are expected this year. Tight credit has made mortgage loans tough to come by. And some potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further.
The drop in home construction activity was felt coast to coast. It fell 48.6 percent in the Midwest, 37.5 percent in the Northeast, 28 percent in the West and 6.3 percent in the South.
Economists say falling prices, sluggish sales and the weak construction rate all point to a housing market that is years away from a recovery.
"There are really large structural problems with the housing market," said Dan Greenhaus, chief economic strategist with Miller Tabak + Co. "This is not a run-up in oil prices. This is a multiyear build up in the housing market that is going to take more than several months or several quarters to get through."
The volatile housing market is weighing on the overall economic recovery. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
The trade group said Tuesday that its index of industry sentiment for March improved slightly to 17. That was the first gain in five months after four straight readings of 16. Still, any reading below 50 indicates negative sentiment about the housing market's future. The index hasn't been above that level since April 2006.